10.27.2008

Mr. Alan Greenspan sat before a Congressional committee last week and blamed the free market for the financial crisis. As many commentators on both sides of the issue have observed, this is particularly noteworthy not only because Greenspan was the longtime head of the Federal Reserve Board, but also because he was a protege of Ayn Rand in the 1960s. For those who refuse to think any deeper than a soundbite, this correlation equals causality; Greenspan once advocated for laissez-faire capitalism, therefore he still did up until his statements last week, and this all means that Ayn Rand was wrong.

Nothing could be further from the truth.

Greenspan was revered as some sort of economic god while he was inflating the bubble. Left and Right alike walked on eggshells around him, hovered on his every word, his every pause. If he cleared his throat, markets in Asia would fall.

A part of his carefully cultivated mystique -- one that was whispered but rarely openly acknowledged -- was the very fact that he was associated with Ayn Rand, and wrote about laissez-faire capitalism at one point. Although he gave that up, he certainly used it to his advantage. It was one of the things that led people to think "well, I don't understand the complex economy, but at least Greenspan does!", as if he possessed some special pixie dust that he got from Ayn Rand that gave him unique economic foresight. He was the economic dictator that the looters wanted John Galt to be in Atlas Shrugged.

And now his supposed fall from grace and his own accusation that it's the fault of the free market is being used to attack both capitalism and Objectivism. Thankfully, many are stepping up to swat those stupid accusations away.

The following is an informal roundup of Greenspan repudiations written by Objectivist bloggers:

In Greenspan the Pragmatist, Galileo Blogs reposts a recent press release from ARI, and then quickly cuts to the core of the issue. He explains just what are the principles at stake, how Greenspan's words and actions contradict them, and then deftly opines about just how could someone go so wrong? His answer: a failure to think in principles. It's a question I have pondered about Greenspan, even before his meddling in the markets came back to bite him, and I think Galileo is spot on.

Galileo also cites examples from Greenspan's autobiography, paying particular attention to his statement that "everyone is essentially motivated by a desire for admiration by other people," and what that says about Greenspan and his pitiful testimony in front of Congress.

His is a long post, but well worth it. A truly excellent bit of writing and analysis.

"Greenspan is a pragmatist coward who hides behind Ayn Rand's skirt when it suits his purposes, and sells her out when it suits his purposes." Obviously, he would rather the United States continue racing towards statism than admit that he played a big part...

In Greenspan Recants, Ed Cline tears apart the myth that Greenspan was a champion of capitalism, saying:

He said he was wrong that deregulation and free markets were the most efficacious means of sustaining a viable economy.

The question is: How would he know that free markets and deregulation of them would be the most efficacious means of sustaining the economy? He abandoned the free market when he became head of the Federal Reserve. Perhaps when he chose to accept that job, he imagined he could save free enterprise from the depredations of the government. Now he knows the consequences of compromise. [bold added]

In Greenspan, Philosophy, and Homo Economicus, Adam Reed examines the error of the economic theory that "economic actors will act, automatically and intuitively, without any need for principled thought or for philosophy, in their actual self-interest," and how Greenspan relied on this mistaken view of human volition and the nature of rational self-interest.

In Oh, Alan!, mtnrunner2 wryly sums up the situation with just the right amount of outrage.

In The Era of Ayn Rand?, Adam responds to an NPR commentator who absurdly stated that "The era of Ayn Rand is over." He wonders, "when exactly did the 'Era of Ayn Rand' start?"

NEW! In The Maestro vs. the Market, Alex Epstein and Yaron Brook of ARI contrast Greenspan of the 60s with Greenspan today, exposing the myth that he has advocated free markets since he started at the Fed.

That does it for the posts I've read so far about Greenspan's Mental and Moral Collapse. If I find any more gems, I'll update this post. If you have read anything that I've missed, drop a note in the comments and I'll add them.

4 comments:

Thank you for nicely bringing together and summarizing all of the posts on Greenspan, including my own. You also do a great job of bringing to life (again) the Greenspan mystique while he was Fed chairman, and the rarely acknowledged root of that mystique.

I take the saga of Greenspan as a lesson of the power of thinking in principles, and of the consequences of failing to do so. As a real-life example, it illustrates the perils that Tara Smith described in her essay on pragmatism in the most recent issue of The Objective Standard.

Your essay was exceptional, and was the reason I decided to do a roundup. I truly think it's worthy of being fleshed out a bit and turned into a piece for TOS.

Speaking of TOS, I just last night started reading Tara Smith's pragmatism article, so I'll definitely make sure to finish it. I have so many things on my reading list, I tend to get sidetracked... If something isn't directly applicable to an issue I'm researching or a current event I want to write about, it tends to move down in the pile. There are a number of articles in the current issue that I want to read but haven't.